(Alliance News) - Shares in infrastructure firm Costain Group PLC skidded on Thursday as it said it was "disappointed" by a dispute over the A465 roads contract in Wales which is to hit profitability.
Costain shares were 17% lower on Thursday morning at a price of 160.27 pence each. In February, they were nearly at 400p.
Costain has been in dispute with the Welsh government over the contract, which involves building a road on the edge of the Brecon Beacons, over responsibility for design information.
An initial arbitration ruled in favour of Costain, but the arbitration award has effectively split responsibility between Costain and the government, which Costain said is contrary to the legal advice it had received.
As a result, it now expects 2019 underlying operating profit to be between GBP17 million and GBP19 million, having previously guided for GBP38.0 million to GBP42.0 million. Net cash will be GBP20 million at the year's end, hit by GBP40 million of cash withheld for the A465 contract.
Elsewhere, Costain said second-half trading has met expectations, with GBP600 million of new work secured both from new and existing contracts. The order book at the end of the year is expected at GBP4.2 billion, flat on a year prior, with some GBP1.1 billion of that from HS2.
Chief Executive Alex Vaughan commented: "Clearly the situation regarding the A465 contract is disappointing. Elsewhere, the business is performing in line with expectations. We have secured a number of new contracts to maintain our healthy order book.
"We have also made good progress with our Leading Edge strategy, accelerating the deployment of higher margin services to our blue chip client base. We are confident this strategy will enhance our offer to clients, deliver higher margins and generate long term shareholder value."
By George Collard; georgecollard@alliancenews.com
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Costain (COST)